Which of the Following Statements Is CORRECT

question 56

Multiple Choice

Which of the following statements is CORRECT?

• A) If a firm lowered its fixed costs while increasing its variable costs,holding total costs at the present level of sales constant,this would decrease its operating leverage.
• B) The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price.
• C) If a company were to issue debt and use the money to repurchase common stock,this action would have no impact on its basic earning power ratio.(Assume that the repurchase has no impact on the company's operating income. )
• D) If changes in the bankruptcy code made bankruptcy less costly to corporations,this would likely reduce the average corporation's debt ratio.
• E) Increasing financial leverage is one way to increase a firm's basic earning power (BEP).

---

Definitions:

U.S. Court of Appeals

Intermediate appellate courts within the United States federal judiciary system that review decisions of federal district courts, regulatory commissions, and other federal courts, playing a significant role in the interpretation of U.S. law.

Federal Circuit

The Federal Circuit is a United States appellate court with specialized jurisdiction, notably in patent law and cases arising from certain federal laws.

Merit Systems Protection Board

A federal agency that protects the rights of federal civil service employees, ensuring they are treated fairly and can challenge wrongful employment actions.

U.S. District Court

A general federal trial court in the United States that hears both civil and criminal cases brought under federal law.